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Growing Lemons or Cherries? Pre and Post-acquisition Performance of Foreign-Acquired Firms in New EU Member States

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  • Jože Damijan
  • Črt Kostevc
  • Matija Rojec

Abstract

type="main" xml:id="twec12176-abs-0001"> Foreign acquisitions are an increasingly important mode of FDI in the new EU member states (NMS). Using firm-level data and a common estimation framework for seven NMS, we study pre- and post-acquisition performance of acquired firms. This paper, to the best of our knowledge, represents the first comprehensive study of the pre- and post-acquisition performance of foreign-acquired firms in NMS. Distinguishing between the impact of target selection and post-acquisition improvements on performance, we find that, on average, foreign investors are targeting ‘lemons’ with growth potential rather than ‘picking cherries’. Regardless of targeting ‘cherries’ or ‘lemons’, performance of acquired firms improved after the acquisition, whereby the boost in productivity is not achieved by reducing employment but mostly by increased efficiency in the use of production factors especially labour.

Suggested Citation

  • Jože Damijan & Črt Kostevc & Matija Rojec, 2015. "Growing Lemons or Cherries? Pre and Post-acquisition Performance of Foreign-Acquired Firms in New EU Member States," The World Economy, Wiley Blackwell, vol. 38(4), pages 751-772, April.
    • Handle: RePEc:bla:worlde:v:38:y:2015:i:4:p:751-772
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    Cited by:

    1. Fons-Rosen, Christian & Kalemli-Ozcan, Sebnem & Sørensen, Bent E. & Villegas-Sanchez, Carolina & Volosovych, Vadym, 2021. "Quantifying productivity gains from foreign investment," Journal of International Economics, Elsevier, vol. 131(C).
    2. Eliasson, Kent & Hansson, Pär & Lindvert, Markus, 2020. "Foreign acquisitions – A shortcut to higher productivity and expansion in smaller firms?," Working Papers 2020:4, Örebro University, School of Business.
    3. Iwasaki, Ichiro & Kočenda, Evžen, 2017. "Are some owners better than others in Czech privatized firms? Even meta-analysis can’t make us perfectly sure," Economic Systems, Elsevier, vol. 41(4), pages 537-568.
    4. Ostapchuk, Igor & Gagalyuk, Taras & Epshtein, David & Dibirov, Abusupyan, 2021. "What drives the acquisition behavior of agroholdings? Performance analysis of agricultural acquisition targets in Northwest Russia and Ukraine," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 24(4), February.
    5. Campagnolo, Diego & Vincenti, Giampiero, 2022. "Cross-border M&As: The impact of cultural friction and CEO change on the performance of acquired companies," Journal of International Management, Elsevier, vol. 28(4).
    6. Zhang, Yan & Bai, Zhuoran & Findaly, Christopher, 2021. "Value-added Tax Reform and Services Exports: Evidence from China," MPRA Paper 111184, University Library of Munich, Germany, revised 2021.
    7. Thomas, Catherine, 2022. "Local value chains in European MNEs," LSE Research Online Documents on Economics 115549, London School of Economics and Political Science, LSE Library.
    8. Wenli Sun & Dan Xie, 2022. "Cross‐border M&As and the performance of Chinese acquiring firms," The World Economy, Wiley Blackwell, vol. 45(5), pages 1614-1647, May.
    9. Apostolov Mico & Scagnelli Simone Domenico, 2019. "Foreign-Versus Domestic-Owned firms in the Predicament ‘Cui bono?’," Business Systems Research, Sciendo, vol. 10(2), pages 18-36, September.
    10. Schiffbauer, Marc & Siedschlag, Iulia & Ruane, Frances, 2017. "Do foreign mergers and acquisitions boost firm productivity?," International Business Review, Elsevier, vol. 26(6), pages 1124-1140.
    11. Mico Apostolov, 2017. "The impact of FDI on the performance and entrepreneurship of domestic firms," Journal of International Entrepreneurship, Springer, vol. 15(4), pages 390-415, December.
    12. Davide Castellani & Maria Mancusi & Grazia Santangelo & Antonello Zanfei, 2015. "Exploring the links between offshoring and innovation," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(1), pages 1-7, March.
    13. Apostolov Mico, 2017. "FDI Uppers and Downers: A Macedonian Case Study," New Global Studies, De Gruyter, vol. 11(1), pages 29-44, April.
    14. Matija Rojec & Mark Knell, 2018. "Why Is There A Lack Of Evidence On Knowledge Spillovers From Foreign Direct Investment?," Journal of Economic Surveys, Wiley Blackwell, vol. 32(3), pages 579-612, July.
    15. Tina Golob Šušteršič & Katja Zajc Kejžar, 2020. "The role of skilled migrant workers in FDI-related technology transfer," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(1), pages 103-132, February.

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